Loans coming home to roost

A new study first reported by one of my Globe colleagues shows that once again, when there's an economic cold going around, black folks catch the flu. This time the illness might be too much for many of black homeowners to survive.

The story, "A smoking gun on race and subprime loans", details that African-Americans are far more likely than whites and in some instances Latinos to have used such loans to buy their houses during the housing boom (which has now gone completely bust, in case anyone was still wondering).

What's a subprime mortgage? In short, it's a type of loan that's supposed to be targeted at people with poor credit. The important thing is that they're typified by higher interest rates than someone with a good credit score would pay. Not all subprime loans are bad, in fact they exist to help people who otherwise would not be able to borrow money for a house because of dings on their credit.

But too many people who shouldn't have had these typse of loans -- or who couldn't afford homes at all -- were using them to buy houses at overblown prices. What's worse is that many such loans not only came with high interest rates, but also had adjustable rates. For those people, who are disproportionately black, the worst-case scenario came true: home prices dropped while interest rates rose, meaning their monthly payments are now unaffordable and many of the homes they bought can't be sold because they are now worth less than the original price.

So why is this a "black community" problem as opposed to one for people with bad credit to worry about? For one, any number of factors contribute to African-Americans having lower credit scores than people of other ethnicities -- like less experience with credit and home buying or fewer family resources for down payments or to stave off credit card bills -- which makes it far more likely for us to have to pay higher interest rates on home mortgages.

Still, if you're college educated, professional and in a high income bracket, you're likely to have better credit and not have to worry about this, right? Actually, another report says that at least in Boston, affluent African-Americans were the most likely segment of the population to have used a subprime loan to buy a house. Assuming, again, that people with higher incomes are more likely to be eligible for cheaper loans, then, that's a trend that's both disturbing and not entirely explicable.

And since subprime mortgages are being blamed for a record number foreclosures all across the country, it's conceivable that many African-Americans across the country are in grave danger of losing their homes -- which could be disastrous in the long term for some black neighborhoods.

Not sure if you've got one? Right now interest rates on a 30-year, fixed rate mortgage are about 5.6 percent, give or take a few points. If you're borrowing, or have borrowed, at a significantly higher rate than that in recent years, you've likely got a subprime loan.

Know anyone who has a subprime mortgage, or think you have one and want to tell your story? Email us.